Correlation Between Southern Copper and First Majestic

Can any of the company-specific risk be diversified away by investing in both Southern Copper and First Majestic at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Southern Copper and First Majestic into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Southern Copper and First Majestic Silver, you can compare the effects of market volatilities on Southern Copper and First Majestic and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Southern Copper with a short position of First Majestic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern Copper and First Majestic.

Diversification Opportunities for Southern Copper and First Majestic

0.52

Correlation Coefficient

Southern Copper  First Majestic

Very weak diversification

The 3 months correlation between Southern and First is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Southern Copper and First Majestic Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Majestic Silver and Southern Copper is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Southern Copper are associated (or correlated) with First Majestic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Majestic Silver has no effect on the direction of Southern Copper i.e., Southern Copper and First Majestic go up and down completely randomly.

Pair Corralation between Southern Copper and First Majestic

Assuming the 90 days trading horizon Southern Copper is expected to generate 0.65 times more return on investment than First Majestic. However, Southern Copper is 1.55 times less risky than First Majestic. It trades about 0.22 of its potential returns per unit of risk. First Majestic Silver is currently generating about -0.32 per unit of risk. If you would invest  210,190  in Southern Copper on September 26, 2024 and sell it today you would earn a total of  4,810  from holding Southern Copper or generate 2.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Southern Copper  vs.  First Majestic Silver

Southern Copper

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Southern Copper are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Southern Copper may actually be approaching a critical reversion point that can send shares even higher in January 2025.

First Majestic Silver

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Majestic Silver has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Southern Copper and First Majestic

The main advantage of trading using opposite Southern Copper and First Majestic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern Copper position performs unexpectedly, First Majestic can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in First Majestic will offset losses from the drop in First Majestic's long position.

The idea behind Southern Copper and First Majestic Silver pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.